Friday, the Bank of Japan decided to offer 1 trillion yen in subordinated loans to banks by the next month to enable them to maintain sufficient capital base even in severe financial conditions.

According to the Principal Terms and Conditions for Provision of Subordinated Loans, eligible banks can avail up to 350 billion yen and will hold its first auction in May. The period of new loan disbursement will end by March, 2010.

The central bank will offer 10-year subordinated loans as well as perpetual subordinated loans. The BoJ stated that the amount of each loan and the interest rate for the first five years will be determined by auction. The central bank plans to conduct auction in each quarter.

The BoJ will release the name of the borrowers by the end of May, 2010.

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